Jindal Steel Ltd. share price target

JPL to benefit from 350MW PPAs; Maintain Buy Jindal Steel & Power's (JSP) 2QFY18 consolidated EBITDA increased 62% YoY to INR13.7b (est. of INR12.4b). Oman steel plants' performance was very strong, as EBITDA increased 73% QoQ to INR3.6b, driven by full capacity utilization and higher spreads. Standalone business' performance was boosted by strong pellet sales, whereas steel volumes disappointed. Interest cost has inched up on restructuring of loans. Jindal Power's PLF was low due to seasonal factors and shortage of coal....

Revenue decreased by 7.94% to Rs. 5607.27 Cr in Q1FY18 when compared to the previous quarter Revenue decreased by 7.94% to Rs. 5607.27 Cr in Q1FY18 when compared to the previous quarter

COMPANY UPDATE

We met the top management of Jindal Steel & Power (JSPL) to get an insight into its business operations and future plans. The company shared its outlook with respect to its different business verticals viz. steel, power and overseas ventures (mining operations in Australia, Mozambique, South Africa and the Oman steel plant). Going forward, over the medium to longer term horizon, growth is primarily likely to come from the expanded upcoming steel making capacity at Angul, Odisha. Overseas mining operation EBITDA to adequately cover its interest outgo...

Revenue rose by 18.09% to Rs. 5296.8 Cr in Q3FY17 when compared to the previous quarter. Also, it rose by 28.15% when compared with Q3FY16.

1QFY17: Shutdown impacts volumes; Oman EBITDA doubles YoY Standalone (SA) steel sales volumes fell 8% YoY (-23% QoQ) to 780kt due to shutdown. Pellet sales jumped 7x YoY to 700kt on attractive exports market.SA steel-only EBITDA/t increased ~INR1,100 QoQ to INR7,435 on higher steel prices. S/A EBITDA declined 2% QoQ to ~INR6.6b due to lower volumes.Jindal Power (JPL) PLF declined 300bp QoQ to 29%. EBITDA/kWh improved 50% QoQ to INR0.9 on account of commencement of 200MW Kerala PPA.Other subsidiaries’ EBITDA rose 6% YoY (+45% QoQ) to INR3.2b, led by Oman. Oman EBITDA was up 2x YoY to INR2.2b driven by steel prices.Networth more than doubled, boosted by ~INR208b on revaluation of land, plant, machinery and buildings. Hence, depreciation was higher. Net debt was broadly flat QoQ at ~INR464b.

JPL’s PLF is estimated to improve on Kerala PPA. SA earnings will be driven by volume pick- up in the second half, while margins will be stable despite steel price increase. We continue to value the stock on asset-based approach (Exhibit 8) because of underutilized power assets in the near term and investment in under-construction steel project. We are raising TP to INR88/share (earlier: INR75). Maintain Neutral.

Terms of EUP1 sale to JSW Energy unfavorable In 4QFY16, Jindal Steel & Power's (JSPL) consolidated EBITDA increased by 63% QoQ to INR9b, driven by a stronger performance of the standalone business...

Losing both volumes and margins; to remain FCF negative for a few years Jindal steel & power (JSP)'s 3QFY16 consolidated EBITDA declined 44% QoQ to INR5.5b on pricing and demand pressure for its products. Interest cost increased...

in the standalone business. However the company continues to face multiple challenges with subdued steel environment impacting the domestic profitability and coal sourcing challenges impacting the power business. While the company is taking efforts to mitigate...